Reading Comprehension

Read the following carefully and answer the next five questions:
G, K and B were partners running a partnership for last 10 years, sharing profit and loss in the ratio of 5:3:2. Post Covid, their firm was affected badly and started incurring losses. On 31^st March, 2023 they all decided to dissolve the firm due to continuous losses. Their capital balances were ₹ 4,00,000, ₹3,00,000 ₹2,00,000 respectively. Firm had liabilities ₹80,000, Cash ₹40,000 other Sundry Assets ₹8,50,00 and P&L A/C constituted the rest. Assets realised at 80% and liabilities were paid in full. There was unrecorded liability of ₹50,000 which was settled at ₹40,000. Realisation expenses amounted to ₹30,000, being paid by G on behalf of the firm.

What is the mode of dissolution of the firm followed by G, K and B ?

1) Question

What is the mode of dissolution of the firm followed by G, K and B ?

Dissolution by Agreement

On the happening of certain contingencies

Dissolution by Notice

Compulsory Dissolution

Solution

Correct option is A

G, K, and B mutually decided to dissolve their firm due to continuous losses, indicating a dissolution by agreement. This mode involves all partners agreeing to terminate the partnership, which fits the scenario described.

2) Question